HERE’S HOW NEERAJ SHARMA GOT HIS FINANCES BACK ON TRACK!

 

Introduction

When Neeraj Sharma got his big fat paycheck from his first full-time job a few months after his graduation, it was a moment of epiphany. He bought the PlayStation he always wanted, took subscription of movie-streaming portals, got a gym membership, went on shopping sprees, among other things. This went on for a few months with his monthly expenditure outweighing his income, and his credit cards began reaching their upper limits. Then came the bolt from the blue. He was laid off as the company was downsizing. Now, Neeraj had bills to pay without a source of income. This can happen to anyone who is not planning his or her finances well. However, it’s just a detour and not a dead-end. Keeping a few things in mind and applying them religiously can get you in better shape, financially.          

Let’s see how Neeraj Sharma turned his finances back on track

Today, the 26-year-old Neeraj Sharma, a graphic designer in Bangalore, has a steady job but he has not let go of the healthy practices that helped him turn his finances back on track. Here are a few things that one should consider doing when caught up in a situation like Neeraj:

• Accept the Problem:

Well, start by accepting that you bungled up. You didn’t see the things turning for the worse especially when everything was going well. Honestly, no one does. However, the key here is to accept that you are in soup and then look for solutions. Denying or delaying debt repayment is problematic. Start taking ownership of your finances by calculating your savings, income, and debts. 

• Figure out Your Expenditure:

Observe your spending patterns. The groundwork for budgeting starts with tracking your expenditure and then strategizing to control it. You need to know where exactly are you spending your money and where you can stop being a spendthrift. While expenses like EMIs, monthly bills, rent, health insurance, are non-negotiable, some like buying groceries and utilities are variables and some like eating out, movies, spas are recreational. You can save a lot by planning better in the last two categories. Also, you will have to sacrifice a few luxuries to achieve your financial goals.

• Prepare for Emergencies:

A loss of a job or a medical emergency is something no one can predict, however, we can always plan better to deal with such situations. Keeping an "Emergency Fund" or “Rainy Day Fund” is a must. It is a contingency plan that requires you to save a little from time to time in a separate savings account. This money will help you wade through the troubled waters when the time comes and should ideally cover around 3-9 months of your living expenses. Calculate your basic monthly cost-of-living and save up to three to six times that amount.

• Track your Daily Expenses:

There are simple apps that you can link with e-wallets and they will let you know where, when and how much did you spend today. You can do it the old-fashioned way by maintaining a dairy. This exercise helps you cut down on your daily expenditures that are simply burning a hole in your pocket. Ask yourself if hailing a cab is really that necessary when traveling by metro saves both time and money.

• Save for Multiple Purposes:

Now, a person like Neeraj has many bills to pay at the end of the month. But he needs some money for the future as well. This could include making investments for tax-saving purposes or for a life post-retirement or as mentioned earlier, for ‘rainy days’. So, create a budget plan, and allocate a part of the income to each section and finally stick to the budget. Have short-term and long-term goals and allocate funds to each accordingly. 

• Approach a Financial Planner:

Just like we approach a CA for tax-saving purposes, we can always ask for a suggestion from a financial planner who can understand your financial situation and give you a blueprint to get out of it. In the absence of proper guidance, people can get really demotivated and lose sight of the progress they have made. 

• Stay on top of your Financial Status:

Last but the least, review your progress. You should know every aspect of your finances. From knowing your credit score to checking your account balance on a weekly basis, stay on top of your financial status. Achieving your short-term goals will inspire you to achieve your long-term goals.

While most of us have pending bills to pay and several debts to settle, we all must strive to reach a stage of financial independence. Earning more via a second job and intelligent investments, saving money through budgeting, staying well-prepared to deal with emergencies, and planning for a life post-retirement, all are a tough nut to crack but must be done for the sake of financial freedom. In case, your finances are dwindling, the above-mentioned points will help you to get back on track and prepare a secured future, financially for yourself and your loved ones just like they did for Neeraj Sharma. 

Disclaimer: Actual name changed on request.